The California Court of Appeal has recently ruled that an arbitration clause that was agreed upon as part of a Union contract was not sufficient to render claims for violation of alleged statutory rights subject to arbitration pursuant to the agreement.

In Flores v. Axxis Network & Telecommunications, Inc., 2009 WL 931706 (CA2 April 8, 2009), plaintiffs were employees of Axxis, a contractor that had contracted with the Los Angeles Unified School District (LAUSD) to perform construction services. LAUSD entered into a “project stabilization agreement” in May 2003 with the Los Angeles/Orange Counties Building and Construction Trades Council and various craft unions. Axxis had agreed to be bound by the LAUSD union contract.

Plaintiffs filed a complaint asserting three causes of action for (1) failing to pay prevailing wages under Labor Code sections 1771, 1774 and 1194, (2) failing to pay waiting time penalties under Labor Code sections 203 and 204.5, and (3) recovery on the payment bonds under Civil Code section 3250 as against Merchants Bonding Company, another defendant. Axxis petitioned to compel arbitration of the employees’ claims under the grievance and arbitration provision of the agreement. The trial court denied the petition. The court of appeal affirmed the decision.

In arriving at its decision, the court discussed two decisions. In Wright v. Universal Maritime Service Corp. (1998) 525 U.S. 70, 119 S.Ct. 391, 142 L.Ed.2d 361, the United States Supreme Court addressed the issue of whether a general arbitration clause in a collective bargaining agreement required an employee to use the arbitration procedures for an alleged violation of the Americans with Disabilities Act of 1990(ADA) (42 U.S.C. § 1210 et seq.). The Wright court noted that in the context of collective bargaining agreements there is generally a presumption of arbitrability of issues that are arguably within the scope of the agreement. Because the case involved the interpretation and application of a statute, “the ultimate question for the arbitrator would be not what the parties have agreed to, but what federal law requires.” Accordingly, for an agreement to require arbitration of a statutory claim the Court held it must be “clear and unmistakable” that the parties intended to waive a judicial forum for statutory claims. The waiver must be “explicitly stated” because “the right to a federal judicial forum is of sufficient importance to be protected against less-than-explicit union waiver in a collective bargaining agreement.”

In Vasquez v. Superior Court, 80 Cal.App.4th 430, 95 Cal.Rptr.2d 294 (2000), the arbitration clause at issue in Vasquez stated that it applied to all grievances and disputes between the union and employer regarding the interpretation or application of any term of the agreement. The agreement also contained a provision prohibiting discrimination against any applicant or employee “on account of race, color, religion, sex, age or national origin under applicable federal and state law.

The Vasquez court concluded that in “determining whether there has been a sufficiently explicit waiver, the courts look to the generality of the arbitration clause, explicit incorporation of statutory antidiscrimination requirements, and the inclusion of specific antidiscrimination provisions. The test is whether a collective bargaining agreement makes compliance with the statute a contractual commitment subject to the arbitration clause. The Vasquez Court provided two ways to make the claims subject to arbitration:

(1) If the agreement clearly, explicitly, and unmistakably shows that the parties intended to make statutory claims subject to arbitration; or

(2) The coupling of a general arbitration clause with an explicit incorporation of statutory antidiscrimination requirements elsewhere in the agreement. This combination is acceptable if another part of the agreement “makes it unmistakably clear that the…statutes at issue are part of the agreement, [then] employees will be bound to arbitrate their [state and federal statutory] claims.”

The court in Flores distinguished Vasquez and indicated that the Vasquez court did not create exclusive criteria or factors regarding arbitration enforceability. The agreement in this case excluded complaints of statutory and regulatory violations from the arbitration procedure. It distinguished between complaints of violations of law on the one hand, and disputes or grievances arising from the interpretation or application of the agreement on the other, and provided different procedural mechanisms for resolving each. The arbitration provision applied to resolve generic, non-specific “disputes” or “grievances” concerning the application or interpretation of contractual terms of the agreement and general disputes arising from that agreement. In contrast, the agreement specified distinctly different procedures and remedies for resolving what it termed “complaints” concerning alleged violations of law, as distinguished from alleged violations of rights solely arising from the agreement.

The court also addressed Labor Code 229 and found that the matter was not arbitrable under that provision also.